Today is the tenth anniversary of the IPO at Covad.
Covad is a CLEC (competitive local exchange carrier) where I was the 39th employee when I joined the company in 1997. I was fresh out of business school, and after Pacific Bell recruited me as ISDN Product Manager (do you remember ISDN?), the founder of Covad recruited me to work for them after I delivered a talk on the future of broadband at some 1990s-era high-tech conference. I think the topic was “Networking the Home.”
At the time, we were on the verge of the dot-com bubble and without even batting an eyelash at my stock option package, I spent time focusing on my salary. I settled in as product manager for a new broadband service called DSL and was happy as a clam with the unlimited supply of Red Vines and Diet Coke in our office kitchen.
On January 22, 1999 the company went public. We had grown to 2,000+ employees, were settled in more lavish offices, and I had just taken the lead at developing our consumer ADSL product line. Since I had been with the company for about 18 months, I had also started to accumulate my stock options – all at the incredible low price of 2 cents per share! By the end of that day, our stock was trading at just over $45 per share — not bad for a first day. I quickly did the math determined that my stock was worth close to $5 million. Having grown up in a middle-class family who always stretched to make ends meet, I felt like I had won the lottery. I was a paper millionaire!
By March 1999, we were trading well into the $70 per share range. The ride continued for another year. We saw new leadership take the controls of the company – most were from U.S. West. Why we decided to staff an anti-phone company with phone company people still baffles me to this day, but the stock was still doing well so we were happy. I watched as colleagues margined their Covad stock options to buy more stock in Covad. Many of us believed that the stock would hit $300 or so per share. Greed overtook common sense as people held too much of our stock without diversifying, bought condos in Maui and Vipers with their margined cash and a strange glee (or greed) permeated the atmosphere. We felt invincible and were having an amazing run.
In March 2000, I and two friends from Covad spontaneously jumped on a plane for Jamaica. With our wealth, we didn’t bat an eyelash as we booked plane tickets with two days notice and each enjoyed our own suite at a resort on the beach. As we lay in the sun after smoking some tasty Jamaican delicacy and recovering from one of many hangovers, we got word Covad stock had fallen from about $100 per share to the around $60. Panic ensued as we called our brokers and bankers. After returning to the office the following Monday, we watched as over the remainder of the year, the stock fell to under $10 per share. Maui condos were lost. Vipers were repossessed. Margin calls wiped out our nest eggs.
I left the company in December of 2000. While I had sold most of my stock as I had received it and thus diversified my account, my broker placed me heavily into tech stocks which continued to take a beating. The $5 million that once graced my presence was long gone. But, at least I was intact and had some savings from the entire experience. I also grew professionally the most I ever have in a job, and am still in touch with tons of people with whom I worked. It was a bit like a high school or college atmosphere at the time, and I feel are are all part of a gregarious alumni group. We survived a disaster together.
This morning, I sent an email to some of my close colleagues from that time. The response from my friend Chris summed it up best:
“Oh well…instead I’m working at my recently nationalized bank….”
Happy Anniversary to our IPO. Maui, I’ll be there soon.
